Many of us have heard the expression “A penny saved is a penny earned.”  In today’s economic standards, we will have to change a penny to a dollar or maybe ten dollars. Ten dollars, saved each day, can make a huge difference in a child’s life. If you save ten dollars a day, you will be able to assist or pay entirely for your child or children’s education. Now, this may seem like a far-fetched concept, but it is the truth. By saving early, you will be able to harness the power of compound interest; this means that for every dollar you save, you are actually earning money.

The Concept of Compound Interest

Compound interest can be defined as the “interest that is calculated on interest.” For example, if you invest $5000 for a period of two years, with an interest rate of 10%, at the end of the first year, your interest earnings will be $500.  Now, during the second year, your compound interest rate of 10% applies to $5500.  Therefore, the interest for the second year would be $550.  Einstein was purported to say that compound interest was the most powerful force in the universe – think about how much money you earn in 10 years, as your interest continues to earn you additional interest.  

Imagine how easily you can save for your kid’s college, when your invested money is earning you $500 a year or more.  A compound interest investment or account is one of the fastest and easiest ways to save for your child’s future.  Instead of becoming burdened with overwhelming college costs, plan ahead for your child’s future by simply a dollar a day – skip that morning donut or collect the loose change in the sofa cushions.   

Tips for saving for college

Saving for college is not a burdensome, difficult task.  In fact, by simply implementing minor changes in your lifestyle, you can ensure that your child obtains the best college education he or she deserves. 

1. Avoid the temptation of convenience - a convenience store is notoriously known for raising the prices of items in the store.  Remember, you are paying for the “convenience.”  For example, aspirin at a convenience store can cost $5 instead of $3.  Oftentimes, you can save fifty cents to a dollar on every item that you do not purchase at a convenience store. This is a simple way to save a dollar a day or more.

2. Reduce your high interest rate credit cards - Many financial experts estimate the average credit card debt, in the United States, is $8000.  A credit card that has an interest rate of 12% can end up costing you $900 per year.  By the time your child is ready for college, you have spent nearly $20,000 in interest payments on your credit cards alone.  Start paying cash for your purchases and put the credit cards away.

3. Make a sacrifice in your daily life - We can all save hundreds of dollars a year, if we simply quit something we do. For example, eating lunch out, having daily chocolate, smoking, or buying lottery tickets are big budget killers. Limiting such luxuries is an easy way to save hundreds, if not thousands, annually; but you will need to have the willpower to stick to your decision.

4. Commute smart - The United States Census Bureau estimates that the average commute to work is approximately 25 minutes.  You can save money each and every day that you carpool, take the bus, ride the metro, or if possible, walk to work. This simple act will help you to save money, and it is better for the environment.

These are four of many tips to increase the money you can put towards your wealth building. These are easy ways to save for college expenses. Remember, the cost of a college education does not have to be a burden if you save and make compound interest your friend.

Many states offer Pre-paid College Plans. These plans lock down the cost of tuition and even books and dorm fees and let you pay a smaller sum now or over time. In effect, your State becomes the piggy bank for your dollar a day plan.